Canadian Dollar Forecast: USD/CAD Drops as BoC Stays on Hold
USD/CAD drops to a fresh yearly low (1.3653) as the Bank of Canada (BoC) keeps the benchmark interest rate at 2.75%.
Share this:
Canadian Dollar Outlook: USD/CAD
USD/CAD drops to a fresh yearly low (1.3653) as the Bank of Canada (BoC) keeps the benchmark interest rate at 2.75%, and the Relative Strength Index (RSI) may show the bearish momentum gathering pace as it falls toward oversold territory.
Canadian Dollar Forecast: USD/CAD Drops as BoC Stays on Hold
USD/CAD extends the decline from the start of the week as the BoC warns that ‘the Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up,’ and the central bank may stick to the sidelines as Governor Tiff Macklem and Co. pledge to ‘assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.’
Join David Song for the Weekly Fundamental Market Outlook webinar.
David provides a market overview and takes questions in real-time. Register Here
In turn, USD may continue to give back the advance from the October low (1.3473) as the BoC appears to be at or nearing the end of its rate-cutting cycle, and a move below 30 in the RSI is likely to be accompanied by a further decline in the exchange rate like the price action from last year.
North America Economic Calendar
However, the data prints on tap for later this week may sway USD/CAD as Canada is expected to shed 15.0K jobs in May while the US is anticipated to add 130K jobs during the same period, and indications of a weakening labor market may produce headwinds for the Canadian Dollar as it puts pressure on the BoC to pursue lower interest rates.
With that said, USD/CAD may face increased volatility later this week amid the employment reports coming out of the US and Canada, but the weakness in the exchange rate may persist as it appears to be tracking the negative slope in the 50-Day SMA (1.3931).
USD/CAD Price Chart – Daily
Chart Prepared by David Song, Senior Strategist; USD/CAD Price on TradingView
- USD/CAD extends the decline from the start of the week to register a fresh yearly low (1.3653), with a break/close below 1.3630 (38.2% Fibonacci extension) opening up the 1.3510 (50% Fibonacci extension) to 1.3520 (23.6% Fibonacci extension) region.
- Next area of interest comes in around the October low (1.3473), but lack of momentum to break/close below 1.3630 (38.2% Fibonacci extension) may curb the recent decline in USD/CAD.
- Need a move/close above the 1.3700 (38.2% Fibonacci extension) to 1.3710 (78.6% Fibonacci retracement) zone to bring 1.3770 (23.6% Fibonacci extension) on the radar, with the next area of interest coming in around 1.3850 (50% Fibonacci extension).
Additional Market Outlooks
US Non-Farm Payrolls (NFP) Report Preview (MAY 2025)
GBP/USD Stuck in Narrow Range amid Failure to Test February 2022 High
US Dollar Forecast: USD/CHF Clears May Low
EUR/USD Defends Rebound from Weekly Low to Hold Above 50-Day SMA
--- Written by David Song, Senior Strategist
Follow on Twitter at @DavidJSong
Related tags:
Latest market news
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
Bank of Canada Hikes as Inflation Risks Intensify: AUD/CAD In Focus
The BoC hikes rates to 2.5% and upgrades its inflation outlook despite weak employment. Could further tightening put AUD/CAD under pressure?
USD/CAD reversal risk builds as central bank showdown looms
USD/CAD has delivered a bullish reversal signal from established support, just as traders prepare for Fed and BoC decisions. Aggressive Canadian rate hike expectations and conflicting momentum signals make the coming session important.
USD/CAD and USD/MXN Q4 2026 Outlook: Will the U.S. Dollar Dominate North America Again?
The final stretch of 2026 is approaching, and North America's major currencies have begun to show a shift in the strength dynamics seen earlier in the year. New expectations of a more aggressive monetary policy stance, particularly in the United States, could be significantly reshaping the outlook for the region. At the same time, this backdrop, combined with potential trade tensions across North America, may become one of the most important drivers of currency performance in the months ahead.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.